Universal Basic Income: An alternative path to development?

There is no shortage of global development challenges for policymakers to grapple with: slowing economic growth, increasing global inequality and mounting environmental pressures to name a few. But in addition to these issues, the unprecedented technological advances of recent times have created new threats to inclusive development. The automation of jobs and the reduction of those jobs is generating labor market tensions that are only likely to increase.

Technology has the potential to complement labor by boosting productivity and thus output and wages. However, it can also displace workers. A 2016 study from the World Bank estimated that around two-thirds of all jobs in developing countries are at risk of replacement by automation. Such significant disruption of labor markets is likely to generate profound social impacts, making the issue a key future priority for policymakers. Addressing or cushioning the economic and social effects of these disruptions will require what Alicia Bárcena, Executive Secretary of Economic Commission for Latin America and the Caribbean (ECLAC) has referred to as “a new generation of social policies.”

At the forefront of the debate on this “new generation” is the concept of a Universal Basic Income (UBI)—fixed, unconditional income given by the state to all its citizens regardless of income or work status.

However, proponents of a UBI suggest that it can spur productivity, alleviate poverty, reduce crime, improve health, raise education, and advance quality of life. The World Economic Forum (WEF) has suggested that a UBI can be the key to unlocking equal opportunities and create a level playing field for all, and that it may not be as unaffordable as it initially seems.

Renewed interest in debating the issue, however, has not turned UBI proposals into fully operational public policies. Countries have been slow to adopt it, making it difficult to evaluate its impact, positive or negative, especially taking into account UBI’s long-term effects. Ongoing trials in developed countries, like Finland and the Netherlands, and developing countries, as India and Namibia, may later offer us better resources to determine the best way to implement a UBI, but it is still too early in those cases to see.

Could Central America lead the way?

Latin American nations have often played a pivotal role in innovative social policies. Conditional cash transfer (CCT) programs—such as El Salvador´s Comunidades Solidarias Rurales and Nicaragua’s Red de Protección Social—were pioneered in the region. Such policies aimed to tackle both immediate material deprivation (through cash-based assistance), while also addressing the broader issues that trap households in poverty across generations such as poor health and lack of education (through making payments conditional on such things as school attendance and healthcare). While evidence suggests that the CCT approach has delivered some degree of success, it has also been plagued by more than a few problems, including cooptation for political purposes, and relative ineffectiveness in the long run compared to sustainable job creation.

Can Central American nations continue to contribute to social policy innovation? On the one hand, it is crucial that leaders in the region try out new approaches to poverty reduction, particularly in light of the future job-losses induced by automation, and the projected population growth in the region. The stakes of inaction are high.

At the same time, we need an ever-stronger base of evidence and more in-depth scrutiny of UBI’s potential benefits and risks. In light of this, and due to Central American countries’ similarities, the region could become a laboratory to examine different implementation schemes, offering ways to reduce poverty while minimizing disincentives to work and other related risks.

The development community has turned a corner and today is proposing the need to try out alternative and often unexplored policies. Such efforts need to go beyond the conventional objectives of eradicating poverty and decreasing inequality, to ensure everyone gets a fair chance to improve their quality of life, with a renewed emphasis on autonomy and personal choice. While it is early to predict what impact will be delivered by the set of “new generation” of social policies, UBI included, this new development approach suggests the need to transform the way in which our markets work (how we produce, distribute and consume). As James Ferguson suggests in his book Give a Man a Fish, strategies and tools such as UBI are starting to offer policymakers new alternatives to re-examine the relationship between production and distribution, to rethink capitalism while tackling income inequality and mass unemployment.

We in Central and Latin America have the duty to transform our current strategies into more comprehensive socioeconomic policies to deliver successful results on long-pending development challenges in the region.

This is a terrible, top-down idea that makes no sense, least of all for the Third World. Only a fool thinks unquestioned handouts “spur productivity.” You spur what you subsidize, in this case idleness.

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